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The Humboldt County Board of Supervisors will consider two items to address the ongoing financial turmoil associated with the Auditor-Controller’s Office during the board’s regular meeting on Tuesday.

The board will discuss a letter signed by 13 of the county’s 19 department heads who assert that Auditor-Controller Karen Paz Dominguez “has failed to fulfill the duties and responsibilities of her position.” According to a staff report, the board will then consider taking additional action against Paz Dominguez, including referring the county’s fiscal reporting shortfalls to various state agencies.

The staff report states:

A memo signed by department heads representing more than 90% of county employees was submitted to the Board on April 4, 2022, stating that, despite department heads’ efforts to support the Auditor-Controller, she has failed to fulfill the duties and responsibilities of her position and as a result has put the county in a financial crisis.

While the Board has received similar letters from outside agencies in education, local municipal government, workforce development, public safety and the private sector, as well as letters from individuals within the county, the attached memo is the first time that a majority of department heads have submitted such documentation to the Board.

The memo is sent from department leadership, both elected and appointed, expressing that their departments cannot collaborate with the one department through which all financial transactions must be recorded, and as a result they are facing dangerous financial challenges which must be fixed.

The board packet includes a fact sheet that lists upwards of 40 existing deficiencies associated with the Auditor-Controller’s Office, including past-due fiscal reports, communication failures and more.

The board narrowly approved a vote of “no confidence” in Paz Dominguez in November 2021. Earlier this month, the board was set to consider a second vote of “no confidence” but Paz Dominguez was unable to attend the board’s discussion.

The staff report notes that the county Workforce Development Board has recommended that “the matter be referred to the California Fair Political Practices Commission, Office of the State of California Attorney General and the State of California Department of Justice for appropriate action.”

Realignment of Payroll Services

The board will also consider the operational realignment of payroll services, a county function that has been rife with problems and controversy since the board voted to shift payroll from the Human Resources department to the Auditor-Controller’s Office in August 2021.

Last month, the board directed staff to look into moving payroll services back out of the Auditor-Controller’s Office. “Specifically, your Board directed the Interim Director of Human Resources (HR), the County Administrative Officer, and the Auditor-Controller to engage in discussions concerning the collective goal with respect to payroll operations, evaluate previously collected data regarding payroll operations, provide your Board with updated findings, and present your Board with refined options related to the placement of the payroll function,” the staff report says.

The board will consider three options:

• Maintain payroll functions in the Office of the Auditor-Controller, which would be “the least disruptive to the current payroll process,” but would likely result in “additional resource requests, existing communication challenges, and challenges related to service delivery.”

• Shift payroll to the County Administrative Office, which could provide an opportunity to stabilize payroll operations “through increased stakeholder engagement and interdepartmental collaboration, increased communication and responsiveness, and dedication to service delivery.” However, there is no precedent for such a shift and it would only be temporary.

• Or, to allow the payroll function to remain in the Auditor-Controller’s Office “for additional time.” This option appears to be nearly identical to the first option but specifies that payroll would “remain with the [Auditor-Controller’s Office] for the near future” and includes a list of additional recommendations if the item were to be selected, including the continued assistance of financial consultant KOA Hills.

The staff report also recommends that the county retain services from CliftonLarsonAllen (at a cost of $259,000) to conduct an audit of payroll services to identify deficiencies. 

“[CliftonLarsonAllen] will assess the county’s processes surrounding one test payroll period,” the staff report states. “…[CliftonLarsonAllen] will provide results with an executive summary describing the scope, objectives, approach, and overall conclusion of the internal audit assessment. In addition, [CliftonLarsonAllen] will describe internal control deficiencies identified along with process improvement recommendations.”

TOT Workgroup

The board will also consider the formation of a transient occupancy tax (TOT) workgroup comprising stakeholders who would oversee and review TOT revenue and work with county staff to develop recommendations for the Board of Supervisors as to how the funds should be spent.

The matter was agendized in an effort to ease concerns from local hoteliers and hospitality industry representatives who strongly oppose Measure J, the Humboldt County Hotel Tax Update Measure, which seeks to increase the TOT rate in the county’s unincorporated areas from 10 percent to 12 percent while also making the tax applicable to overnight RV parks and private campgrounds. 

Members of the Humboldt Lodging Alliance (HLA) have criticized the county — especially the County Administrative Office — for failing to include industry representatives in initial conversations on the subject. The organization has also raised concerns about the timing of the ballot initiative and called its wording “misleading.”

“The timing of the measure to local hoteliers could threaten the fragile gains made by the industry in recent months as the economy recovers from Covid-related measures,” the alliance says in an April 22 letter. “…Moreover, while County Staff and elected officials have said that the money would go to specific purposes, such as rural fire departments, homeless support and the arts, it would nevertheless go into the unrestricted general fund, which means the TOT funds could be used for any purposes related to the operations of the County Government. There are simply no laws or ordinances to ensure best use of the TOT funds.”

The HLA is calling for a “no” vote on Measure J, but if it were to pass, the organization said it “would want to be an active participant” in the proposed workgroup.

The Board of Supervisors meeting will take place at 9 a.m. on Tuesday, April 26. The agenda can be found here.